Broadcom Cuts 2,500 jobs

SAN JOSE, Calif. — Broadcom will lay off about 2,500 employees as part of a decision on June 2 to exit the cellular baseband business for which it could not find a buyer. The news came in a call with financial analysts in which the company essentially reported neither profits nor revenue growth for its latest quarter.

Broadcom will take a $417 million charge, about $150 million of it this quarter, for the restructuring which will include closing or consolidating 18 offices. "The decision to exit the cellular baseband business puts Broadcom on a path to being a stronger company," said Broadcom's chief executive Scott McGregor.

The decision underscores the significance of the smartphone market and how it is consolidating into the hands of fewer, larger system and chip makers. The layoffs represent about 20% of Broadcom's 12,400 employees.

With its decision to exit the market, Broadcom's cellular SoC business will fall quickly. It is expected to decline to about $50 million in the third quarter and then about half that in the last quarter of the year.

Broadcom expects the next two quarters will be fairly flat overall with revenues estimated at about $2.14 and $2.04 billion respectively.

Despite the cellular move, Broadcom's sales of connectivity chips such as Wi-Fi and Bluetooth will rise in the next quarter, in part due to new system launches planned by partners. However, those products may lose some sockets long term for designs paired with baseband sales, McGregor said.

On the bright side, McGregor said Broadcom is leading a move to 25 Gbit/second Ethernet for data centers which represent about two-thirds of its infrastructure revenues. The company has a leading position in the HEVC codec for Ultra HD resolution systems with design wins beginning this year but revenues not starting until next year, he said. In addition, he predicted growth in the company's chips for automotive and the Internet of things sectors

Broadcom reported revenues of $2.04 billion for the second quarter, up 2.9% from the first quarter but down 2.3% from the second quarter of 2013. The company reported a $1 million loss down from profits of $165 million in the last three months and up from a loss of $251 million in the second quarter of 2013.

The company reported 55% gross margins, a historically high figure. It will spend more than $800 million to repurchase stock, twice the amount previously planned.

@kris: it looks to me that Broadcom may have made the right decision, considering the tough market environment in the mobile business. Qualcomm's stock took a beating yesterday, mostly because it could not collect its royalties to the fullest in China and cited softness for the rest of the year.

Broadcom has a solid position in the datacenter infrastructure market and more attention should go there in my opinion.

For nearly a decade this CEO has been drawing one of the highest salaries in the Fortune 500 but what is there to show for it? Billions in squandered income, a stock price that hasn't budged since he took office, one failed acquisition after another. And now the coup de grace: complete dissolution of his prized Mobile business unit without reaping one red cent for years of expensive R&D, and 2500 engineers on the street.

The Board should be hanging their heads in shame. Throw the bums out, every last one of them.

A painful but smart decision. As you stated, if you're not in Samsung or Apple, the rest of the sockets out there don't add up to enough to make a viable baseband business. I hope the affected engineers land on their feet soon.

Before acquiring Renesas, there were large layoffs on both sides - Broadcom as well as Renesas - to the tune of 30 to 40%. The remaining team was legacy Broadcom and the acquired Renesas. Broadcom decided to sell its modem business around 8 months after acquiring Renesas. In those 8 months, there were a couple of phone launches (carrying on Renesas legacy) with a big player, and a little earning (but not a loss). That was enough to close it. Probably a grocery store takes more than 8 months to recover initial investments ....

This RIF was announced early in June as the report indicates but a 20% chunck must be a sizable number of very specialized US engineers being impacted.

The report also indicates that they are planning on consolidating 18 (international) locations and currently they are negotiating a few campus options for this effort. It is intriguing that the report is sourced from San Jose, CA as I had thought that their HQ' were in SoCal (Orange County, CA).

My understanding is that their profits were riding in the coattails of Apple while ignoring whole Android market. I assume Qualcomm is doing a better job, especially now that MediaTek is thinking of opening up a site in SanDiego region to better compete.

Since BroadCom is getting out of the baseband (BaseCom?) business, they plan to re-direct more of their tech-energy into the InternetOfThings sector!

When I worked there (Irvine) and they changed the policy in 2011, the company paid out the remaining vacation owed to employees, as they are legally required to do. As far as I know, vacation is currently untracked, which means no payout when you quit or are laid off.